Why are downturns labeled with letters?

A popular question for economists lately has been what shape this recession will take. Will it be a “U,” a “V,” or maybe an “L”? Could we even find ourselves caught up in the roller coaster of a “W,” just when we think we’ve finally voted out that letter once and for all? What’s with the alphabet soup?

This categorization is a kind of verbal shorthand for describing the shape of the ups and downs of the gross domestic product and the broader economy. It’s not an exact science, which is part of the reason there’s so much debate about which type the United States is experiencing. There’s no governing body or think tank tasked with crunching the numbers and officially declaring a recession one letter or another.

In general, V-shaped recessions are those that last for a few quarters, while the more unpleasant U-shaped recessions can drag on for up to a couple of years. It’s the difference between a head cold that clears your system in a week and a case of bronchitis that leaves you hacking into tissues all month.

V-shaped recessions are also considered to be shallower and less devastating in their scope, although this isn’t reflected in the letter-labeling. (No one’s asking about uppercase versus lowercase U’s and V’s, at least not yet.) V-shaped recessions are those in which GDP and correlating metrics like employment and sales don’t slide as much.

A V-shaped recession is what happened after the tech bust earlier this decade: GDP bounced back in a period of months rather than years. A U-shaped recession, on the other hand, is what the United States saw between November 1973 and March 1975: a 16-month slog the 1975 Economic Report of the President characterized as “severe.” In describing U-shaped downturns, MIT economics professor and former IMF chief economist Simon Johnson used the visual of a bathtub with steep, slippery sides.

Since World War II, the U.S. economy has tended more toward U-shaped recessions. Out of 11 recessions since 1945 (not counting this one), we’ve had six U’s, three V’s, and a W, which we’ll get to in a minute.